By Andrew McGregor, MD of Who Owns Whom (Pty) Ltd
The ANC inherited a government debt of 50.4% of GDP from the corrupt apartheid government in 1994, and under the leadership of presidents Nelson Mandela and Thabo Mbeki, this declined to 23.8% by 2008. Under Jacob Zuma, government debt more than doubled again to approximately 60% of GDP.
History repeats itself, and will do so again unless the South African citizenry put a stop to the milking of the public purse.
The starting point is to know who the state is procuring from and to whom these people are associated through company ownership and cross directorships. But to know that, there must be disclosure of the ultimate beneficial owners of private companies.
While JSE regulations require listed companies to disclose beneficial ownership, the Companies Act places no such requirement on private companies, and the current Companies Amendment Bill revision is an ideal opportunity to address this.
The South African Companies and Intellectual Properties Commission does require private companies to lodge annual returns, but these do not contain beneficial ownership and are not available to the public.
Including research conducted by Amabhungane, Who Owns Whom (WOW) made representation to the Department of Trade and Industry (DTI) in November 2016 to include in the revised Companies Amendment Bill 2018:
- The improvement of compliance with section 26 of the Act (public access to company information);
- Disclosure of beneficial ownership in annual returns; and
- Public access to annual returns.
The draft Amendment Bill published in September 2018 did not include these suggestions and a further submission to the DTI was made by WOW in December 2018 and a similar submission was made by the Helen Suzman Foundation (HSF) at the same time.
Money laundering, terrorist funding and our own Gupta, VBS, Steinhoff and Bosasa delinquencies make a compelling case for maximum corporate transparency.
Investigative journalists, researchers, whistle-blowers, NGOs, and members of the public have been able to bring some cases into the public domain and to the attention of financial regulators and tax authorities. But the opacity of information means that the full extent of corporate malfeasance is yet to be uncovered.
HSF research shows that in Singapore shareholder information is stored in the Electronic Register of Members (EROM) which is administered by the Accounting and Corporate Regulatory Authority. Members of the public can access the EROM online after the payment of a fee. This system was implemented in January 2016 following amendments to the Companies Act.
The New Zealand Companies Office administers an online companies register where information relating to companies is readily available. No fee is payable – all that is required is to enter identifying information such as the company name or registration number into the search function. Certain historical data can also be accessed online.
India’s Ministry of Corporate Affairs provides online access to share registers in much the same way as has been proposed in the WOW submission to the DTI. Companies are required to file an annual return within 60 days of an annual general meeting. It is required that a list of shareholders is attached to Form MGT 7, which forms part of the return. This information is available to the public upon payment of a fee
Amabhungane research shows that on our own continent, Kenya most recently introduced a key amendment to its Companies (Amendment) Act No. 28 of 2017 to include information relating to beneficial owners of companies. In particular, the amendment addresses the phenomenon of investors engaging nominees to conceal true ownership, thereby facilitating corrupt practice. Ghana and Nigeria are equally rapidly moving toward public disclosure of beneficial ownership information as soon as 2019 and 2020 respectively.
The DTI has an important opportunity to peel back these layers of corporate secrecy with the latest Companies Amendment Bill.